Pub Date : 2021-09-01DOI: 10.1093/he/9780198848493.003.0011
B. Hannigan
In addition to their fiduciary obligations, directors are subject to duties of care and skill. This chapter discusses the statutory standard of care, skill, and diligence; the content of the duty; and the duty to exercise independent judgement. In looking at care and skill, key issues are the extent to which delegation is possible and the degree to which the delegating director must maintain a residual duty of supervision. The chapter considers the law’s expectations of executive and non-executive directors, including the level of knowledge that they must bring to bear and examines how the standard required reflects their differing roles in the management of the business.
{"title":"11. Duty of care, skill, and independent judgment","authors":"B. Hannigan","doi":"10.1093/he/9780198848493.003.0011","DOIUrl":"https://doi.org/10.1093/he/9780198848493.003.0011","url":null,"abstract":"In addition to their fiduciary obligations, directors are subject to duties of care and skill. This chapter discusses the statutory standard of care, skill, and diligence; the content of the duty; and the duty to exercise independent judgement. In looking at care and skill, key issues are the extent to which delegation is possible and the degree to which the delegating director must maintain a residual duty of supervision. The chapter considers the law’s expectations of executive and non-executive directors, including the level of knowledge that they must bring to bear and examines how the standard required reflects their differing roles in the management of the business.","PeriodicalId":10779,"journal":{"name":"Company Law","volume":"9 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84240635","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-03-15DOI: 10.1093/HE/9780198786634.003.0017
Lee S. Roach
This chapter addresses what is known as the capital maintenance doctrine — a series of rules designed to protect the company's creditors by ensuring that capital is maintained and not returned to the company's members. Any limited company can reduce its share capital by passing a special resolution followed by court confirmation. A private company can reduce its share capital by passing a special resolution supported by a solvency statement. On the other hand, public companies are generally prohibited from providing financial assistance to others to acquire their shares. Meanwhile, a company can generally only pay a dividend out of distributable profits. The typical three-stage process for paying dividends is the directors recommend an amount to be distributed by way of dividend; the company declares the dividend by passing an ordinary resolution; and the dividend is paid out.
{"title":"17. The maintenance of capital","authors":"Lee S. Roach","doi":"10.1093/HE/9780198786634.003.0017","DOIUrl":"https://doi.org/10.1093/HE/9780198786634.003.0017","url":null,"abstract":"This chapter addresses what is known as the capital maintenance doctrine — a series of rules designed to protect the company's creditors by ensuring that capital is maintained and not returned to the company's members. Any limited company can reduce its share capital by passing a special resolution followed by court confirmation. A private company can reduce its share capital by passing a special resolution supported by a solvency statement. On the other hand, public companies are generally prohibited from providing financial assistance to others to acquire their shares. Meanwhile, a company can generally only pay a dividend out of distributable profits. The typical three-stage process for paying dividends is the directors recommend an amount to be distributed by way of dividend; the company declares the dividend by passing an ordinary resolution; and the dividend is paid out.","PeriodicalId":10779,"journal":{"name":"Company Law","volume":"29 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-03-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76757076","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-03-15DOI: 10.1093/HE/9780198786634.003.0008
Lee S. Roach
This chapter addresses the process by which directors are appointed and remunerated, the various board structures, and the importance of board diversity. All companies are required to appoint a director, with the Companies Act 2006 (CA 2006) providing that a private company must have at least one director, and a public company at least two directors. Every public company must also appoint a company secretary. Before a person is appointed as a director, that person and the company will usually negotiate to determine the new director's remuneration package. Remuneration practices tend to differ markedly depending on company size. The two most common board structures in the world are the unitary board and the two-tier board. Meanwhile, in recent years, board diversity has become a major governance topic. The focus to date has been on increasing gender diversity in the boardroom, but recent attention has also focused on ethnic diversity.
{"title":"8. Board appointment, structure, and composition","authors":"Lee S. Roach","doi":"10.1093/HE/9780198786634.003.0008","DOIUrl":"https://doi.org/10.1093/HE/9780198786634.003.0008","url":null,"abstract":"This chapter addresses the process by which directors are appointed and remunerated, the various board structures, and the importance of board diversity. All companies are required to appoint a director, with the Companies Act 2006 (CA 2006) providing that a private company must have at least one director, and a public company at least two directors. Every public company must also appoint a company secretary. Before a person is appointed as a director, that person and the company will usually negotiate to determine the new director's remuneration package. Remuneration practices tend to differ markedly depending on company size. The two most common board structures in the world are the unitary board and the two-tier board. Meanwhile, in recent years, board diversity has become a major governance topic. The focus to date has been on increasing gender diversity in the boardroom, but recent attention has also focused on ethnic diversity.","PeriodicalId":10779,"journal":{"name":"Company Law","volume":"17 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-03-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78494765","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-03-15DOI: 10.1093/HE/9780198786634.003.0006
Lee S. Roach
This chapter focuses on the complex rules regarding who can act on behalf of the company, and how liability can be imposed on the company for the actions of others. A company can enter into a contract by affixing its common seal to the contract; by complying with the rules in ss 44(2)–(8) of the Companies Act 2006 (CA 2006); or by a person acting under the company's express or implied authority. Section 39 of the CA 2006 provides that a contract cannot be invalidated on the ground that the contract is outside the scope of the company's capacity. Meanwhile, section 40 of the CA 2006 provides that the power of the directors to bind the company, or authorize others to do so, is free of any limitation under the company's constitution. The chapter then considers the four methods of liability: personal liability; strict liability; vicarious liability; and liability imposed via attribution.
{"title":"6. Corporate capacity and liability","authors":"Lee S. Roach","doi":"10.1093/HE/9780198786634.003.0006","DOIUrl":"https://doi.org/10.1093/HE/9780198786634.003.0006","url":null,"abstract":"This chapter focuses on the complex rules regarding who can act on behalf of the company, and how liability can be imposed on the company for the actions of others. A company can enter into a contract by affixing its common seal to the contract; by complying with the rules in ss 44(2)–(8) of the Companies Act 2006 (CA 2006); or by a person acting under the company's express or implied authority. Section 39 of the CA 2006 provides that a contract cannot be invalidated on the ground that the contract is outside the scope of the company's capacity. Meanwhile, section 40 of the CA 2006 provides that the power of the directors to bind the company, or authorize others to do so, is free of any limitation under the company's constitution. The chapter then considers the four methods of liability: personal liability; strict liability; vicarious liability; and liability imposed via attribution.","PeriodicalId":10779,"journal":{"name":"Company Law","volume":"40 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-03-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74057343","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-03-15DOI: 10.1093/HE/9780198786634.003.0022
Lee S. Roach
This chapter looks at the legal framework that regulated takeovers, as well as discussing corporate reconstruction via a scheme of arrangement and a scheme of reconstruction. A reconstruction under s 110 of the Insolvency Act 1986 involves all or part of a company's business or property being transferred or sold to one or more new companies, and the original company is then voluntarily wound up. A s 110 reconstruction binds all members and creditors who are affected by it, even those who did not vote for it. Meanwhile, a scheme of arrangement, under Pt 26 of the Companies Act 2006 (CA 2006), is a compromise or arrangement between a company and its creditors, or any class of them; or its members, or any class of them. Takeovers are regulated by the Panel on Takeovers and Mergers, who are responsible for drafting and updating the City Code on Takeovers and Mergers.
{"title":"22. Corporate reconstructions and takeovers","authors":"Lee S. Roach","doi":"10.1093/HE/9780198786634.003.0022","DOIUrl":"https://doi.org/10.1093/HE/9780198786634.003.0022","url":null,"abstract":"This chapter looks at the legal framework that regulated takeovers, as well as discussing corporate reconstruction via a scheme of arrangement and a scheme of reconstruction. A reconstruction under s 110 of the Insolvency Act 1986 involves all or part of a company's business or property being transferred or sold to one or more new companies, and the original company is then voluntarily wound up. A s 110 reconstruction binds all members and creditors who are affected by it, even those who did not vote for it. Meanwhile, a scheme of arrangement, under Pt 26 of the Companies Act 2006 (CA 2006), is a compromise or arrangement between a company and its creditors, or any class of them; or its members, or any class of them. Takeovers are regulated by the Panel on Takeovers and Mergers, who are responsible for drafting and updating the City Code on Takeovers and Mergers.","PeriodicalId":10779,"journal":{"name":"Company Law","volume":"106 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-03-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82196480","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-03-15DOI: 10.1093/he/9780198786634.003.0015
Lee S. Roach
This chapter explores three remedies that aim to protect a company's members: the derivative claim; the unfair prejudice petition; and the petition to wind up the company. Where a company has sustained a loss, a member may be able to bring a derivative claim on behalf of the company. In order to continue a derivative claim, the member must obtain permission from the court to continue the claim. A member can also petition the court for a remedy where the company's affairs have been conducted in a manner that is unfairly prejudicial to that member's interests as a member. In unfair prejudice cases, the most common remedy is a share purchase order. Lastly, a member can petition the court for a winding-up order, with the relevant ground here being winding up where the court thinks it is just and equitable to do so.
{"title":"15. Members’ remedies","authors":"Lee S. Roach","doi":"10.1093/he/9780198786634.003.0015","DOIUrl":"https://doi.org/10.1093/he/9780198786634.003.0015","url":null,"abstract":"This chapter explores three remedies that aim to protect a company's members: the derivative claim; the unfair prejudice petition; and the petition to wind up the company. Where a company has sustained a loss, a member may be able to bring a derivative claim on behalf of the company. In order to continue a derivative claim, the member must obtain permission from the court to continue the claim. A member can also petition the court for a remedy where the company's affairs have been conducted in a manner that is unfairly prejudicial to that member's interests as a member. In unfair prejudice cases, the most common remedy is a share purchase order. Lastly, a member can petition the court for a winding-up order, with the relevant ground here being winding up where the court thinks it is just and equitable to do so.","PeriodicalId":10779,"journal":{"name":"Company Law","volume":"130 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-03-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81787498","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-03-15DOI: 10.1093/HE/9780198786634.003.0004
Lee S. Roach
This chapter looks at one of, if not the, defining characteristic of the company, namely its corporate personality. At its most basic level, the doctrine of corporate personality simply provides that the company is a person. As such, it is able to do many things that humans are able to do, including own property, enter into contracts, and be subject to legal rights, duties, and obligations. However, the artificial nature of corporate personality, and the fact that it can be abused, means that a significant body of law has developed in this area. The law provides for a number of ways in which a company's corporate personality can be set aside. These include statutory provisions and the common law. Moreover, individuals may contract away the protection of corporate personality and render themselves personally liable.
{"title":"4. Corporate personality","authors":"Lee S. Roach","doi":"10.1093/HE/9780198786634.003.0004","DOIUrl":"https://doi.org/10.1093/HE/9780198786634.003.0004","url":null,"abstract":"This chapter looks at one of, if not the, defining characteristic of the company, namely its corporate personality. At its most basic level, the doctrine of corporate personality simply provides that the company is a person. As such, it is able to do many things that humans are able to do, including own property, enter into contracts, and be subject to legal rights, duties, and obligations. However, the artificial nature of corporate personality, and the fact that it can be abused, means that a significant body of law has developed in this area. The law provides for a number of ways in which a company's corporate personality can be set aside. These include statutory provisions and the common law. Moreover, individuals may contract away the protection of corporate personality and render themselves personally liable.","PeriodicalId":10779,"journal":{"name":"Company Law","volume":"12 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-03-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87126645","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-03-15DOI: 10.1093/HE/9780198786634.003.0020
Lee S. Roach
This chapter discusses why companies borrow money, the various sources of debt capital, and the rules relating to secured and unsecured borrowing. An obvious reason why companies borrow is because the company is struggling financially, and so other forms of capital will prove insufficient to meet the company's debts or liabilities. In such a case, debt capital may be the only obtainable form of capital. Like shares, debt securities are tradeable financial instruments that a company can issue in order to raise finance. The principal form of security is a charge, which can be either fixed or floating. When determining whether a charge is fixed or floating, the courts will focus not on how the charge is labelled, but on the rights and obligations which the parties intended to grant each other. A failure to register the charge will render the charge void against a liquidator, administrator, or creditor.
{"title":"20. Debt capital and security","authors":"Lee S. Roach","doi":"10.1093/HE/9780198786634.003.0020","DOIUrl":"https://doi.org/10.1093/HE/9780198786634.003.0020","url":null,"abstract":"This chapter discusses why companies borrow money, the various sources of debt capital, and the rules relating to secured and unsecured borrowing. An obvious reason why companies borrow is because the company is struggling financially, and so other forms of capital will prove insufficient to meet the company's debts or liabilities. In such a case, debt capital may be the only obtainable form of capital. Like shares, debt securities are tradeable financial instruments that a company can issue in order to raise finance. The principal form of security is a charge, which can be either fixed or floating. When determining whether a charge is fixed or floating, the courts will focus not on how the charge is labelled, but on the rights and obligations which the parties intended to grant each other. A failure to register the charge will render the charge void against a liquidator, administrator, or creditor.","PeriodicalId":10779,"journal":{"name":"Company Law","volume":"223 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-03-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73006992","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-03-15DOI: 10.1093/HE/9780198786634.003.0023
Lee S. Roach
This concluding chapter explores the different types of liquidation, the powers of a liquidator, and the ways in which a company can be dissolved and restored. The Insolvency Act 1986 (IA 1986) provides for two types of liquidation: voluntary winding up; and winding up by the court. A voluntary winding up occurs where the members voluntarily wind up the company by passing a special resolution. Meanwhile, compulsory winding up occurs where a person petitions the court for an order of winding up the company, and the court grants such an order. The liquidator's role is to gather, realize, and distribute the assets of the company to its creditors and, if there is a surplus, to persons so entitled. Ultimately, the process by which a company's existence is ended is known as ‘dissolution’. A dissolved company can be restored in certain circumstances.
{"title":"23. Liquidation, dissolution, and restoration","authors":"Lee S. Roach","doi":"10.1093/HE/9780198786634.003.0023","DOIUrl":"https://doi.org/10.1093/HE/9780198786634.003.0023","url":null,"abstract":"This concluding chapter explores the different types of liquidation, the powers of a liquidator, and the ways in which a company can be dissolved and restored. The Insolvency Act 1986 (IA 1986) provides for two types of liquidation: voluntary winding up; and winding up by the court. A voluntary winding up occurs where the members voluntarily wind up the company by passing a special resolution. Meanwhile, compulsory winding up occurs where a person petitions the court for an order of winding up the company, and the court grants such an order. The liquidator's role is to gather, realize, and distribute the assets of the company to its creditors and, if there is a surplus, to persons so entitled. Ultimately, the process by which a company's existence is ended is known as ‘dissolution’. A dissolved company can be restored in certain circumstances.","PeriodicalId":10779,"journal":{"name":"Company Law","volume":"44 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-03-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77072704","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-03-15DOI: 10.1093/HE/9780198786634.003.0007
Lee S. Roach
This chapter assesses what a director is and the different types of director that exist. Section 250 of the Companies Act 2006 (CA 2006) provides that a director ‘includes any person occupying the position of director, by whatever name called’. A person validly appointed as a director is known as a de jure director, whereas a person who has not been validly appointed, but who acts as a director, is known as a de facto director. A shadow director is ‘a person in accordance with whose directions or instructions the directors of a company are accustomed to act’. Other types of director include executive director, non-executive director, and alternate director. Meanwhile, certain persons such as major shareholders or creditors may have the power to nominate a person to the board, and this nominated person is known as a nominee director. Many companies will appoint some of its directors to specific board roles.
{"title":"7. Classifications of director","authors":"Lee S. Roach","doi":"10.1093/HE/9780198786634.003.0007","DOIUrl":"https://doi.org/10.1093/HE/9780198786634.003.0007","url":null,"abstract":"This chapter assesses what a director is and the different types of director that exist. Section 250 of the Companies Act 2006 (CA 2006) provides that a director ‘includes any person occupying the position of director, by whatever name called’. A person validly appointed as a director is known as a de jure director, whereas a person who has not been validly appointed, but who acts as a director, is known as a de facto director. A shadow director is ‘a person in accordance with whose directions or instructions the directors of a company are accustomed to act’. Other types of director include executive director, non-executive director, and alternate director. Meanwhile, certain persons such as major shareholders or creditors may have the power to nominate a person to the board, and this nominated person is known as a nominee director. Many companies will appoint some of its directors to specific board roles.","PeriodicalId":10779,"journal":{"name":"Company Law","volume":"43 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-03-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90621512","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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